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Telefónica unveils major new strategy, identifies €2B in new revenues

Spanish giant has unveiled a new five-point plan that includes spinning off much of its Latin American assets and a go-to-market strategy that the operator believes can generate €2 billion in new revenues by 2022.

November 27, 2019

4 Min Read
Telefónica unveils major new strategy, identifies €2B in new revenues

Telefónica caught the telecoms world off guard late Wednesday by unveiling a major new, five-point corporate plan that, according to chairman and CEO José María Álvarez-Pallete, sets the company up for the next 100 years.

The five pillars of the new strategy are:

  • To focus investment and growth in the operator's most important markets, namely Spain, Brazil, the UK and Germany.

  • The creation of Telefónica Tech, which will focus on cybersecurity, IoT/big data and cloud developments, "aims to become a key partner helping other companies undertake their digital transformation." The operator says these parts of its business are currently growing revenues at a rate higher than 30% and that this new division is expected to generate more than €2 billion ($2.2 billion) in additional revenues by 2022. This business will be headed up by José Cerdán, currently global head of the operator's B2B unit, who will report to Chief Operating Officer (COO) Angel Vilá. This move sounds a little like the operator's creation of Telefónica Digital, which was launched to great fanfare in 2011 but shuttered in 2014.

  • The creation of Telefónica Infra will build upon Telefónica's current 50.01% stake in Telxius, which manages the operator's telecom towers and subsea cable assets. This division will focus on the "development and monetization" of towers, DAS (distributed antenna systems, usually used to provide indoor wireless coverage), data centers (including edge computing assets), new fiber or submarine cable rollouts, as well as other infrastructure assets. Telefónica says it will take an "open approach to agreements and shareholder structures (majority or minority), and to find the best partners for each type of asset," suggesting the unit will be tasked with finding external investors to take a stake in its mobile towers, a move the operator signalled in September. Telefónica Infra will be headed up by Guillermo Ansaldo, most recently head of the operator's Global Resources unit. He will also report to COO Angel Vilá.

  • An operational spin-off of Hispanoamérica (the operator's Latin American operations other than those in Brazil) into a single unit, a move that signals a potential sale. The business will have its own management team, the main goal of which will be to "attract investors and obtain potential synergies with other market agents." CEO José María Álvarez-Pallete noted that "the particular conditions in these markets have had an impact on the business, reducing its contribution in recent years for different reasons."

  • The "redefinition of the company's corporate center," to introduce a new operating model to "become more agile and accelerate the execution of our strategy." This sounds like it will involve job cuts in centralized functions.

Figure 1: Telefonica Chairman and CEO Jose Maria Alvarez-Pallete says the new strategy will set the operator up for the next 100 years. Telefónica Chairman and CEO José María Álvarez-Pallete says the new strategy will set the operator up for the next 100 years.

The revamp involves some changes at the senior executive level: Out goes Chief Commercial Digital Officer Mariano de Beer and head of Hispam Sur Bernardo Quinn; in comes Enrique Blanco, who as CTIO will be head of Technology and Architecture, a unit responsible for defining the operator's "strategic technological guidelines."

Blanco will report to COO Angel Vilá, who appears to be the day-to-day lynchpin in the new-look operator: In addition to overseeing Telefónica Tech and Telefónica Infra, Vilá will have overall responsibility for the four main country businesses; the Digital Consumer unit (headed by Chema Alonso, currently Chief Data Officer); and Business Solutions, which will be headed up by Telefónica Tech's José Cerdán.

For the new executive management team chart and other details about the move, see this press announcement.

The move looks bold, separating large chunks of the telco's physical infrastructure into a group that will seek external investments and creating a specific services unit tasked with driving new revenue growth (something that all operators are currently craving), but is no doubt designed to set the company up to operate in the most efficient way as it rolls out its 5G strategy.

Light Reading will report more on this revamp as more information becomes available.

— Ray Le Maistre, Editor-in-Chief, Light Reading

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